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Muted Q4, margins contract sequentially!

Our view and valuation

ACRYSIL Ltd reported a muted Q4FY22 wherein demand was impacted due to higher logistical cost and on‐going geopolitical tensions. EBITDA margins contracted by 153bps QoQ to 20.3%. For FY22, Quartz volumes came in at 650,000units & stainless‐ steel sink units stood at 104,000. Quartz sinks/Steel sink/Appliance &others constituted 77%/14%/9% of total revenue respectively & Export‐Domestic mix stood at 80‐20% for FY22. Going ahead, though Q1FY23 is likely to remain subdued due to higher inventory stocked at dealer level, with pick‐up in home improvement & renovation trend across globe along with higher demand from new‐home sales & rapid shift in demand towards Quartz sinks, we expect demand to bounce back sharply. Acrysil Ltd has a strong order book & with new upcoming capacities‐ 160,000units in Q1FY23 & 200,000 in Q3FY23 of Quartz sinks & 90,000 units of stainless‐steel capacity in Q1FY23, we reckon company to report a strong volume growth of 25%/18% in Quartz/steel sinks respectively over FY22‐FY24E. Acrysil Ltd’s newly acquired UK company‐ “Tickford Orange Ltd” will accelerate company’s  growth form FY23E.     

Therefore, we reckon company’s Revenue/EBITDA/PAT to report a CAGR of 35%/32%/34% respectively over FY22‐FY24E.  Owing to higher input cost & elevated freight cost we expect operating margins to contract to 20.1%/20.5% in FY23E/FY24E respectively from 21.4% in FY22. Though we have revised our EPS expectations upwards which is largely due to incorporation of “Tickford Orange Ltd”, we have revalued the company at 25x on FY24E EPS of Rs44.1, arriving at a target price of Rs1,100. Hence, we maintain our BUY rating on the stock.   

Result Highlights

Revenue stood at Rs1,389Mn (in‐line with our estimates), reporting a growth of 38%YoY & 8.5%QoQ

EBITDA for the quarter stood at Rs282Mn, reporting a growth of 39%YoY & flattish as compared to previous quarter. EBITDA margins came in at 20.3% in Q4FY22 Vs 20.2%/21.8% in Q4FY21/Q3FY22 respectively. Sequentially EBITDA margins contracted on account of higher other expenses which as a%sales came in at 31% Vs 29% in Q3FY22 due to higher logistic cost.  

Net profit came in at Rs166Mn, a growth of 25.9%YoY but a 5%QoQ decline.

For FY22: Quartz constituted 77%, steel sinks formed 14% & appliances biz constituted 9% of total topline. Exports was 80% of total biz.(growth of 61.4%YoY) & domestic grew by 49%YoY

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